RBS Back in Black!

Shock, horror! One of the world’s biggest banks, RBS, has made a profit! Before exceptional tax charges the bank reported a profit for the first half of this year of £1.1billion. A figure made even more impressive considering the fact that they are disposing of non-core assets as well as de-leveraging their entire business.

I won’t go into detail about their results, simply to say that Stephen Hester feels they are well ahead of their targets for restructuring. All consumer divisions have reported growth and impairments continue to fall.

Key information for me was that the net asset value per share (fully diluted) is now up to 52.8p. Today, RBS is trading at around 53p … so selling at liquidation value rather than a valuation of a strong, profit making company that will probably be around for many more decades! Another ‘asset’ that RBS has which most people ignore is its £5billion tax credit in the UK. When profits do return, it can use this to avoid paying corporation tax – probably for a couple of years.

The few people that read my blog will know that I said RBS was a screaming buy at 30p – it is still cheap at 50-something. The only catch is that you have to be able to play the long-term game and wait until the end of 2011 when the picture should be significantly better still.

I don’t have any share price expectations for the end of 2010 as the markets are usually irrational, however if the share price breaks above 59-60p (the highest it has traded for over a year) then it probably won’t stop until ~70p.